SYDNEY: Missing out on Australia’s natural gas export boom may be the best thing that happened to Arrow Energy Ltd. The decision by the Royal Dutch Shell Plc and PetroChina Co. JV to scrap a A$20-billion project to ship Arrow’s fuel overseas as liquefied natural gas looks like a blessing in disguise. The Brisbane-based producer now plans to boost output, allowing it to take advantage of Australian prices pressured higher by tighter supply at home. Meanwhile, rivals that opted to export are grappling with cost overruns, low international prices and mounting criticism as the country faces a looming gas shortage. “They’re probably thanking their lucky stars they didn’t go ahead with Arrow LNG,” said Graeme Bethune, CEO of EnergyQuest, an Adelaide-based research company.
Australia’s race to become the world’s biggest seller of LNG — gas supercooled into liquid and shipped overseas on tankers — has put it on course for a supply crunch at home amid lower-than-expected domestic production and drilling bans in several states. Solving the budding crisis has become a top priority for Prime Minister Malcolm Turnbull, whose government last month said it would restrict exports from the eastern state of Queensland unless producers ensure adequate supplies for the domestic market. Arrow, owner of the largest uncontracted gas reserves in eastern Australia and supplier of about 20% of Queensland’s gas, has begun engineering and design work on an expansion of its Tipton project in the state’s Surat basin that will more than double output, the company announced last week. The gas, which is extracted from coal beds, will be for both domestic consumption and available for use in export projects, it said. “We now have a vision to become a very cost-competitive upstream coal-seam gas business in Queensland,” Ivan Tan, Arrow’s chief operating officer, said in an interview. While Tan didn’t comment on whether the company was better off having not built an LNG project, which was scrapped in 2015, he said Arrow has benefited from the lessons learned by the three other Queensland exporters and is focused on cost efficiency.
